A Post Falls tax-increment financing district formed to help recruit the big Harpers Inc. office-furniture plant there in 1993 is expected to be dissolved at the end of next year, when it finishes repaying bonds sold to pay for infrastructure improvements so the plant could be built.


The dissolution will be significant, sources say, because it will mark the first time in the state of Idaho that such a district will cease to operate, and a host of other taxing entities then will begin receiving revenues currently going to repay tax-increment financing bonds.


The taxing district, called the West Seltice Urban Renewal Agency (URA), sold tax-increment finance (TIF) bonds to pay for infrastructure improvements needed to serve the Harpers site, says Skip Hissong, a member of the URAs board and a former Post Falls City Council member.


The $1.2 million raised from the sale of the bonds was spent on water- and sewer-line improvements and installation of new streetlights, curbs, and gutters, primarily on West Seltice Way, Hissong says.


The improvements were instrumental in Post Falls success in recruiting the Harpers plant and its 500-some good-paying jobs, says Bob Potter, of Jobs Plus Inc., Kootenai Countys economic-development organization.


All of the other communities that competed for the Harpers plant offered the company free land on which to build, Potter says. With the availability of TIF funds, Potter was able to work out a deal under which the plant site was annexed into the city of Post Falls, and the URA was created to make infrastructure improvements. In exchange, the propertys owner, who benefited from the infrastructure improvements, donated a portion of his land to Harpers for the plant.


What it did is put me on equal footing with the other communities that were trying to attract Harpers, Potter says. It certainly was a good tool in that case. We wouldnt have Harpers there if we didnt have (tax-increment financing), he says.


The tool is one that economic-development officials in Spokane covet. Currently, tax-increment financing is illegal in the state of Washington, although business groups continue to lobby the Legislature to make it available.


How it works


TIF bonds are issued by a URA established for a specific purposein Harpers case, attracting an industrial employer. Proceeds from the bonds pay for improvements on land or buildings that help the agency carry out its purpose.


The improvements increase the assessed value of the property, and taxes paid on the difference between the original property value and the improved property valuethe incrementis used to pay off the bonds. Taxes on the original property value continue to flow to most of the various taxing entities that are entitled to receive them, such as cities, fire districts, and the like.


To make the financing work, those taxing entitieswith the exception of school districtsforgo any increase in property-tax revenue that results from the improved propertys higher value as long as the district is in operation. During that time, the portion they receive remains frozen at what they received from the propertys unimproved value. After the bonds are paid off and the URAs work is finished, all tax collections on the improved property then go to those taxing entities.


Forgoing the increased property-tax revenue for a period of five or more years is a good investment for the taxing entities, Hissong says, because the increased tax receipts they get after the URA finishes its work probably wouldnt exist if not for the improvements made with TIF funds.


That, however, is how TIF bonds work in theory.


In practice, once the original bonds have been repaid, URAs in Idaho so far have extended their lives by finding new projects in their taxing districts and issuing new bonds to pay for the added improvements, says Jerry Basler, an urban planner with the city of Post Falls.


Especially a lot of (TIF) districts in the Boise area, they just do extensions and keep the district open, says Basler, who administers three URA districts in Post Falls.


Hissong says thats not fair to the taxing entitiesthe cities and fire, highway, and hospital districts that forgo property-tax increasesor to individual taxpayers, who arguably would shoulder a lighter tax load if tax revenues werent redirected to repay TIF bonds.


Taxing districts in Idaho can only raise their property tax base by 3 percent per year, he explains. If money used to pay off TIF bonds were going to the other taxing entities instead, that could mean a smaller increase, or even a decrease, in taxes paid by individual property owners.


Many entities have said theres no direct advantage to a city to take these bonds off, finish them out, Hissong says. They just keep coming up with new projects. But the members of the Post Falls (urban renewal agency) I think are a little bit more politically conservative, and truly believe that this is the taxpayers money, and not our own.


Because a TIF district has never been closed before in the state of Idaho, Were going to be forging some new ground, Hissong says.


The Harpers TIF bonds should be paid off sometime before Dec. 31, 2001, Basler says. At that time, the West Seltice URA will be dissolved, he says, although two other URAs in Post Falls still will be activeone for the Riverbend Commerce Park area and one for downtown Post Falls.


Basler says its impossible to know, at this point, how much property-tax revenue Harpers will add to the tax rolls in Post Falls, but the amount is likely to be substantial.


When the TIF bonds were issued, the assessed value of the Harpers property was $451,405, the Kootenai County Assessors Office says. The land still is assessed at that value as far as most taxing entities there are concerned, but the assessed value of Harpers plant and equipment now totals $15.2 million, the assessors office says.


Potter, of Jobs Plus, says the Harpers example is a perfect way for a tax-increment financing to work.